Buying a car is a dream for most of the people. But it becomes difficult to own a car due to bad credit or financial problems. Hence bad credit car loans are sanctioned for people having bad credit issues. Bad credit can occur because of bankruptcy, repayment defaults, arrears, etc. Lenders feel reluctant to provide loans for the bad credit holders. However bad credit car loans can help you in such situations.
The loan for bad credit requires collateral and you may choose any of your assets. This will help you to have lower interest rates with longer repayment terms. There are 2 major ways of getting the bad credit loans. One is the secured credit car loans and another, unsecured credit car loans.
Secured credit car loans require your property as collateral with lower interest rates with very less monthly rates and longer duration for payment. Unsecured credit car loans require smaller repayment time with higher interest rates but do not require any collateral. The most important advantage of the bad credit car loans is that it can help to increase your credit scoring at every level.
If you strictly require external financing for purchasing a car then choose inexpensive car. Hence with a bad credit you can afford for repaying the amount easily to the financing authority. Having a credit score below 600 makes you earn an interest rate of nearly 18%. But if you have a higher score then the interest rate will be lesser. Hence it is advised that before you get a bad credit car loan, attempt to increase your score by at-least 40% to 50% of the total value. Keep your down payment during purchase of the car higher and hence the risk of repayment will be lesser.